Welcome to Thoughts on the Market. I'm Michael Zezes, head of Public Policy and Municipal Strategy for Morgan Stanley.

Along with my colleagues bring you a variety of perspectives, I'll be talking about the intersection between U.S. public policy and

financial markets.

It's Wednesday, September 25th at 9 a.m. Eastern.

In the last week, clients have been asking a lot of questions about how policies like

Medicare for all, a rollback of tax cuts, or a rollback of other recent regulatory changes could undo some of the market gains of the past few years.

It's a valid question to ask.

We're going to be rolling out research to answer this question more precisely in the coming months,

but here's something to consider in the meantime.

Whether you're concerned about either side's policies impacting the market,

you have to calibrate your concern not just to that party's chances of occupying the White House, but also both

houses of Congress. That clears a path to transformative policy change, the kind that can have a real impact on markets.

Right now, betting markets say there's about a 10% chance for each side that such a path could open.

But even when it is open, that doesn't mean transformative policy change is a done deal.

History shows that the president only gets one-third to one-half of their campaign promises made law in their first year.

That pattern played out with the current administration, which executed a major tax reform,

but was unable to complete a major health care overhaul or infrastructure package.

So while investors shouldn't bake a transformative policy into their base case, at least not yet,

there's some sectors to be aware of that could show extra volatility as campaign season progresses.

One example we expect is health care.

That segment of the market substantially underperformed the S&P 500 for a period this spring

on concerns of a Medicare for all policy outcome.

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